The frenzy in the IPO market among individual investors seems to be ebbing amid a volatile secondary market, lofty valuations and lower grey market premiums.

The last eight offerings were, on average, subscribed 1.98 times against 49.5x for the previous 65 IPOs that came in this year. Several issues saw a muted response from wealthy and retail investors. The recently-concluded NTPC Green Energy IPO got subscribed 2.55 times overall, with the category for non-institutional investors (NII) seeing bids for less than the shares on offer. Recent IPOs where the NII quota remained under-subscribed include Hyundai Motor India, Acme Solar Holdings, Swiggy, Niva Bupa Health Insurance and Zinka Logistics, according to Prime Database, a primary market tracker.

All said, the portion for wealthy investors has remained under-subscribed in six of the last 10 issues, while eight out of the last 10 issues saw a retail subscription of less than 4x as against the average of 37x for the past 64 issues.

What’s more, the last 10 companies that listed on the bourses have given average returns of 6 per cent on listing day versus 33 per cent given by the previous 61 firms that listed this year. Hyundai Motor India, Acme Solar Holdings, Deepak Builders & Engineers, Godavari Biorefineries and Sagility India ended in the red on debut.

“Retail and HNI investors primarily come in for listing gains, which are reflected in the grey market premiums, which have come off in the last couple of months owing to the volatility seen in the secondary market,” said Pranav Haldea, Managing Director, Prime Database.

A recent SEBI study showed that 54 per cent of IPO shares allotted to retail investors were sold within a week.

“Investors have been apprehensive about the kind of money they will make in the IPOs in a falling market,” said Deepak Jasani, Head - Retail Research, HDFC Securities.

Experts believe that the uptick in the market until late September had led promoters and bankers to believe that investors would lap up the issuances at any cost . This prompted them to price their offerings at a hefty premium, leaving little money on the table for investors.

“The margin of safety for investors who are not able to exit in the first week or so is low because the new offerings have become pricier. This is the reason why investors, especially the high net worth individuals, have pulled back and are looking at valuations more closely,” said Jasani.

While investors may continue to remain cautious in the near term, the fear of missing out is likely to drive them back if a few offerings do well, he added.

The Nifty has fallen about 9 per cent since late September on sustained selling by foreign institutional investors. The index is up about 10 per cent in the year to date.

Twenty nine companies hold the required approval for an IPO and another fifty nine are awaiting a regulatory nod. Together these companies could raise over ₹1.32 lakh crore.

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